Credit Suisse Current Financial Leverage
| CHIAX Fund | USD 6.38 0.01 0.16% |
Credit Suisse's financial risk is the risk to Credit Suisse stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Given that Credit Suisse's debt-to-equity ratio measures a Mutual Fund's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Credit Suisse is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Credit Suisse to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Credit Suisse is said to be less leveraged. If creditors hold a majority of Credit Suisse's assets, the Mutual Fund is said to be highly leveraged.
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Credit Suisse Financial Leverage Rating
Credit Suisse Floating bond ratings play a critical role in determining how much Credit Suisse have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Credit Suisse's borrowing costs.Credit Suisse Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Credit Suisse's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Credit Suisse, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Credit Suisse debt ratio should be compared their industry average or other competing firms.Understaning Credit Suisse Use of Financial Leverage
Credit Suisse financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Credit Suisse's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Credit Suisse assets, the company is considered highly leveraged. Understanding the composition and structure of overall Credit Suisse debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Credit Suisse's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Credit Suisse's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
The fund normally invests at least 80 percent of its net assets, plus any borrowings for investment purposes, in high yield, fixed income securities . The high yield, fixed income securities in which the fund will invest for purposes of this 80 percent policy will consist entirely of senior secured floating rate loans issued by non-investment grade companies. It may invest up to 30 percent of its total assets in securities of non-U.S. issuers. Please read more on our technical analysis page.
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards Credit Suisse in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, Credit Suisse's short interest history, or implied volatility extrapolated from Credit Suisse options trading.
Pair Trading with Credit Suisse
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Credit Suisse position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Credit Suisse will appreciate offsetting losses from the drop in the long position's value.Moving together with Credit Mutual Fund
| 1.0 | CHICX | Credit Suisse Floating | PairCorr |
| 0.82 | CRSOX | Credit Suisse Modity | PairCorr |
| 0.82 | CRSAX | Credit Suisse Modity | PairCorr |
| 0.73 | CSAIX | Credit Suisse Managed | PairCorr |
The ability to find closely correlated positions to Credit Suisse could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Credit Suisse when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Credit Suisse - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Credit Suisse Floating to buy it.
The correlation of Credit Suisse is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Credit Suisse moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Credit Suisse Floating moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Credit Suisse can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Check out the analysis of Credit Suisse Fundamentals Over Time. Note that the Credit Suisse Floating information on this page should be used as a complementary analysis to other Credit Suisse's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.